The International Financial Services Centre (IFSC) is becoming a crucial place for finance with strong rules, great infrastructure, and smart leaders. But to reach its full potential, the IFSC needs more financial activity. This was a key topic at a recent primary markets conference held at the IFSC.
How Government and Regulators Can Help
For the IFSC to flourish as a global financial hub, it needs help from the government and regulators. In the past, special policies and incentives have really helped markets grow. For instance, when the Securities and Exchange Board of India (SEBI) started in 1992, the Indian capital market was valued at ₹1 lakh crore. Now, over 30 years later, it is worth 400 times more.
The IFSC could benefit from creative ideas and policies from the government, such as issuing foreign currency bonds. Lower taxes like reduced withholding tax can encourage more bond issuers, growing the bond market. Additionally, attracting global companies to issue bonds in IFSC would help showcase India’s financial services globally.
Ideas Discussed at the Conference
Several important ideas were discussed at the conference to boost activities and attract more investors and issuers:
1. Attracting Investors
– Incentives for Domestic Investors: To make more investors participate, two strategies were suggested:
– Increasing Investment Limit for Mutual Funds: This would allow mutual funds to access more money and develop platforms in the IFSC.
– Expanding the Liberalized Remittance Scheme (LRS) Limits: Allowing people to invest in different currencies through the IFSC would bring in more funds.
2. Encouraging Issuers
– Dual Listing: Allowing companies to list their shares at both IFSC and other markets would make the IFSC more appealing.
– Private Trading of Unlisted Companies: Setting up trading for shares of private companies could create new opportunities, especially for early investors.
Learning from Successful Global Models
Globally, platforms for unlisted securities have done very well. For example:
– NASDAQ Private Markets: This platform allows private companies to trade their shares before going public, facilitating over $30 billion in transactions.
– Facebook Pre-IPO Trading: Facebook traded its shares on private platforms before going public, showing that private trading can bring liquidity.
A similar system at the IFSC could be transformative. Though the current focus is on listed companies, allowing trading in shares of companies planning to list in the next few years would help investors while paving the way for future public listings.
Conclusion
The IFSC has established a solid foundation with its regulatory framework and infrastructure. However, to become a world-class financial hub, it needs to attract more investors and introduce innovative financial tools. By following these suggestions and learning from global successes, the IFSC can shine as a top destination for financial services worldwide. The groundwork is laid; now it’s time to bring in the action to make this a memorable success!
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